Long-term story of India, 2-wheeler industry remains intact: Hero MotoCorp

Two-wheeler industry faces short-term challenges due to the COVID-19 situation but the overall India growth story remained intact, Hero MotoCorp said in its Annual Report for 2019-20.

Sharing information with company shareholders, Hero MotoCorp Chairman Pawan Munjal noted that there remains ample growth opportunities for the company in domestic as well international markets.

“The short-term business outlook remains uncertain due to the COVID-19 pandemic. However, the long-term story of India and that of the two-wheeler industry remains intact, strong and positive,” Munjal said.

There are ample growth opportunities in India, as well as in the global markets to grow company’s business to new heights, he added.

“The continuous expansion of our geographic footprint over the past five years to more than 40 countries now creates a platform to build scale beyond India,” Munjal said.

The company’s investments in R&D over the past five years have been twice of that of other players in the industry, Munjal noted.

“We are on the cusp of creating yet another world record, a historic milestone of 100 million motorcycles and scooters in cumulative sales in FY21,” he added.

Munjal said the company continues to remain debt-free and maintains a strong balance sheet.

The company’s cash reserves have now reached Rs 14,096 crore, he added.

“The financial strength of the company augurs well and will help it to successfully navigate itself into the future despite these trying times,” Munjal said.

The two-wheeler major said it expects demand to be robust this fiscal with people expected to opt for personal mobility amid coronavirus pandemic.

The company expects the domestic two-wheeler segment to stabilise in the next two three months, it added.

“For FY21, we expect that the industry will witness greater two-wheeler demand due to the customer’s need for personal mobility to maintain safety standards,” Hero MotoCorp said.

The industry would stabilise by the festive season and the pent-up demand will provide the much-anticipated boost to the industry, it added.

“Being a market leader, we should be well placed to capitalise on market shift. Whenever business picks up, we will be ready and have the right products to meet demand,” the company said.

The company said it is of the view that in the short term, the economic cost of the lockdown could prolong economic recovery in India even as the country unlocks and reopens for business.

The company said that government initiatives like corporate tax rate cuts, cash transfers to farmers, rural developmental spends along with RBI measures should facilitate growth.

India may be less integrated with the global value chain than the Association of Southeast Asian Nations (ASEAN) countries, but it is not immune to the impact of global trade uncertainties, the company noted.

The country’s exports have slowed down, even as imports of Indian goods have also faced a moderate slump, it added.

“Irrespective of the current challenges, including the pandemic, the long-term growth story of India remains intact. The demographic factor in the shape of a younger population, increasing urbanisation, the rising aspiration of the youth, women’s increasing access to education and employment, and potential of consumer credit remain the drivers of growth,” Hero MotoCorp said.

It is important for India to navigate the next few quarters carefully before embarking again on the road to stronger growth, it noted.

Despite the sluggish economic activity around the world during the year (2019-20), the company said it continued to collaborate with partners to keep growing its global footprint.

“With the appointment of a new distributor in Peru, we have now expanded our global footprint to more than 40 countries in FY20, up from just four countries in FY12,” the company said.

The company said has been following a market-specific strategy to further enhance its presence in markets in specific geographies.

“For example, we plan to build on the momentum we have already gained in the Asian and Latin American markets by launching new models in the 150-160cc category. Having grown in double digit in Africa during FY20, we are sharpening our focus among the ‘Boda-Boda’ (local two-wheeler taxi) riders,” it noted.

In Bangladesh and Nepal, the company is deepening its financing network across markets and strengthening the momentum, it said.